Energy Bills: A Primer on Electricity and Natural Gas Charges and Fees
Utility costs, like many business costs, are often viewed by business owners as a fact of life. After signing the U.S. Constitution, Benjamin Franklin wrote, “Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.” As a key contributor in the early studies of electricity, it’s quite possible Franklin would have added utility bills to the list — had he seen the proliferation of the electrical grid. Nonetheless, utility bills have become increasingly more complicated in recent years, with long lists of charges and fees. But what exactly are ratepayers, commercial and/or residential, paying for?
The majority of charges can be broken down into a few basic categories, including:
Service and Facility charge: This flat monthly charge covers the cost of meter reading, billing, customer service, and maintenance of equipment such as meters and service lines (source). These charges include a built-in margin.
Commodity purchased: This cost is associated with the actual energy resources, electricity or natural gas (“NG”), purchased from an energy utility. These energy commodity prices are a pass-through and do not include a built-in margin.
Distribution Charges: Whether it be Demand Charges for electricity services or Capacity Charges for NG services, overall Distribution Charges cover the costs associated with the amount of throughput energy your business uses. Like the flow rate for water or bandwidth for internet service, utility companies have to increase the size of energy delivery infrastructure if your business continues to use more energy during peak times. These charges include a built-in margin.
Adjustments, Charges, and Riders:
Charges: A comprehensive, blanket term for any energy utility bill fee. Charges can be regulated or unregulated. A prime example of a charge that do not fall into the categories 1-3 include:
Energy Assistance Charge (“EAC”): Helps fund programs to help Coloradans most in need. It is a mandatory monthly fee on Colorado bills, required by state law (HB21-1105), to fund programs like Energy Outreach Colorado (“EOC”) that help low-income households and non-profits with energy bills, weatherization, and energy retrofits, with the goal of preventing shutoffs and ensuring affordability (source).
Adjustments & Riders: Often used interchangeably, adjustments and riders refer to modifications to the standard base rate. They are often approved without a rate case but still provide transparency into cost recovery. They can result in a charge or a credit on a ratepayers bill and often reflect variations in costs that fluctuate more frequently than base rates (source). Some examples of adjustments and riders include:
Unexpected cost recovery relating to storms: In the state of Colorado, the most recent case was Winter Storm Uri in 2021, that saw Coloradans subsequently hit with a 1.4% price increase on their bills as a result of the $500 million price surge for natural gas during the period between February 13th-17th, 2021. The Extraordinary Gas Cost Recovery Rider (“EGCRR”) was fully phased-out in early 2025 on Feb. 14th (source).
Demand Reduction programs: Often the most overlooked charge, this premium helps fund mandated energy efficiency and demand management programs to help consumers reduce their usage.
Renewable Energy programs: Includes adjustments/riders such as Xcel Energy’s Renewable Energy Standard Adjustment (“RESA”), Colorado Energy Plan Adjustment (“CEPA”), and the Clean Energy Plan Revenue (“CEPR”) rider. These three example adjustments cover costs associated with the mandated increase in generation or purchase of renewable power, coal-fired power plant closures, and Clean Energy Plans.
Transmission Costs: Expenses associated with high-voltage transmission and/or major pipeline projects that bring electricity/NG into a utility’s local distribution system.
Adjustments to General Rate Schedules: When there are required expenses for continuation of energy service to all ratepayers that were not included in a multi-year rate case but still fall into the 1 through 3 category buckets, the Colorado Public Utilities Commission (“CPUC” or “PUC”) allows for an adjustment(s) to the general rate schedules.
Some adjustments, charges, and riders include a margin, while others do not. It's important to note that not all adjustments are included in the list above.
What This Means for Businesses and Residents in Colorado
If you reside in or run a business in Colorado and receive services from Xcel Energy, Black Hills Energy, Atmos Energy, or a similar Investor Owned Utility (“IOU”), your bill likely reflects this mix of base rates, usage charges, and adjustments. Some municipal utilities may or may not include similar charges. Understanding these line items can help you:
Recognize what portion of your bill is fixed (metering, billing, and customer service) vs. variable (actual energy use and Distribution Charges).
Spot how policy-driven riders or adjustments (renewables, emissions reductions, transmission, and assistance programs) impact your costs.
Consider energy efficiency, demand management, or renewable options to manage usage and reduce total cost. Many of riders and adjustments operate as pools of funds for rebates and incentives on things like energy efficiency, demand management, and renewable energy. If you do not participate in these programs, you’re leaving money on the table!
Evaluate demand — and demand-based charges — especially if you’re a business that draws a lot of power during peak times or has variable usage patterns.
There are details regarding market dynamics and technical specifics that influence adjustment, rider, and charge costs. Similarly, changes to charges are constantly evolving. If you require assistance understanding your business or commercial utility bills, feel free to reach out. PUA can also work with residential customers that are part of a condominium association, cooperative housing, HOAs, and/or multi-family housing. However, utility bill audits and overcharge recovery services would have to be approved by the community. For more information, please feel free to reach out at the contact information below:
Contact Information
Matt Jochym
Advisor/Founder
(M): 970-235-1098
(E): matt.jochym@peakutilityadvisors.com
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